Scotmid, the co-operative battling with the supermarket giants in the convenience store market, has reported a 15% fall in first-half operating profits to £2.2 million after a particularly tough summer trading period.

But the group, which has almost 330 retail outlets mainly in Scotland across its food, pharmacy and perfume formats, continues to benefit from resilience in its funeral and property businesses, and insists performance has been "better than expected".

Chief executive John Brodie said: "We knew from an economy point of view it was going to be a difficult start to the financial year, and traditionally the second half is always better. What we didn't expect was the worst weather in the last 100 years."

That had put a "significant dampener on performance in June and July, hitting sales in our food convenience store key lines with ice cream, water, soft drinks, salads and barbecue products badly affected".

In the Semichem pharmacies arm, sales of seasonal goods such as suntan lotions were down. The embryonic Fragrance House chain was grappling with the fact "consumers have tightened their belts in the last six months", Mr Brodie said.

It added to an underlying retail environment which continued to be "very challenging as the drawn-out recession and the squeeze on household incomes impacts on our customers' spending power".

Turnover was up £1.9m at £211.1m, driven by sales growth from the former Botterills stores, Semichem online, and funerals, while property delivered "a good consistent performance". Debt was reduced by £3m, while assets remained steady at £96.5m.

Mr Brodie said competition in the convenience market was possibly "stronger than it has ever been", and consolidation had removed smaller players, but the availability of individual sites and single-owned stores was not an issue.

He said: "As a co-operative, we continue to take a long-term view, and one of the things we have done in terms of our 'future vision' is put a lot of initiatives live into our Warrender Park (Edinburgh) store."

The trial concept store included an emphasis on fresh, local sourcing, a Scotmid radio service, a craft baker and wifi.

"On one side as you come in there is a Costa Express and on the other a freshly squeezed orange juice machine, then it's fresh produce – it looks more like a greengrocer than a convenience store."

Mr Brodie said it had been "favourably received by a number of industry experts".

He said a move into "complementary areas" was on the agenda, as Scotmid had shown diversification was a strength.

"We have had a look at a number of things in the past six months but we can afford to be selective and nothing has met our criteria at this stage."